13 May 2016

Retail sales growth eases in first quarter

1:55 pm on 13 May 2016

Consumers were a bit more cautious in the first three months of the year, but still spent up large on electronics.

Statistics New Zealand says the volume of retail sales, which takes account of price movements, rose 0.8 percent in the three months ended March compared with a 1.1 percent rise in the previous quarter.

Strongest growth was in electronic and electrical goods and online sales, while the slump in oil prices boosted fuel sales, and the warm weather encouraged spending in restaurants, takeaways and bars.

Total retail sales were more than $20 billion for the quarter, up nearly 5 percent on a year ago.

Electrical and electronic goods sales rose 3.8 percent and food and beverage services were up 1.3 percent.

The overall growth was lower at 0.8 percent than the 1.1 percent of the previous quarter.

Daniel Snowden of ASB Bank said sales levels were slightly softer than expected and this pushed expectations of GDP growth back a touch.

"Given the continued strong tourism and migration data through the quarter, plus continued low petrol price, giving consumers more disposable income, the data suggests consumers remain cautious with their wallets," Mr Snowden said.

"We continue to expect the RBNZ to cut the OCR by 25bp a piece in June and August given our outlook for muted inflation."

By contrast, another economist was more chipper about the figures.

Satish Ranchhod of Westpac said a 0.8 growth rate was slower than previously, but it was always likely that there would be a pull back from the robust figures of last year.

"If we look at the components of spending, we saw strong growth in areas like online retailing and electronics. We have got strong tourist arrivals, but domestically, things are looking pretty good right now," he said.

"But if we look a little further ahead, to the latter part of the decade, we see some risks around retail spending because of increasing household debt levels.

"We can't continue growing the economy by ramping up debt. And in the meantime our vulnerability to unfavourable shocks, both internal and domestic, are starting to get worse."

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